Franchising: more lunacy for the collection

05 July 2010

The taxpayer is to be presented with bills of £24 million because the award of two rail franchises has been delayed. Theresa Villiers admitted in Parliament last week that costs ‘arising from the delay to replacing franchises are estimated to be £6 million for Essex Tameside and £18 million for Greater Anglia’.

This led ASLEF’s general secretary Keith Norman to the conclusion that, ‘Rail franchising becomes more complex, vague - and expensive – by the day. In the bizarre world of franchising, the tax payer even gets a bill for doing nothing,’ he says.

The explanation from Ms Villiers justifying the missing £24 million is a perfect example of ‘franchise speak’ – in that it is meandering, jargonistic and apparently meaningless. She ‘explained’ in an answer to Shadow rail minister Sadiq Khan, ‘The two franchise extensions will have a theoretical opportunity cost caused by foregoing the higher premium/lower subsidy expected if the franchises were re-competed instead of extended. This is difficult to quantify, because assumptions need to be made about the likely prices from new bidders versus the cost of extending with incumbents. The opportunity cost arising from the delay to replacing franchises was estimated to be £6 million for Essex Tameside and £18 million for Greater Anglia. However, we believe that including the two franchises in the reformed system, on which we will be consulting shortly, will yield benefits for passengers and facilitate investment in the railways which will outweigh these costs.’

And there’s another huge bill on the way because of delays in giving out the East Coast franchise. The actual amount of this, Ms Villiers says, will ‘depend on the final timescale for the competition, and reflect the extent to which the premium that would be paid by a private sector train operator might exceed that agreed with the current East Coast operator’.

‘This single exchange in Parliament conveys in a nut-shell what’s wrong with rail franchising,’ Keith says. ‘It is incomprehensible, shadowy, covert – and wastes a lot of breath and money. We have to dump this wasteful system and take rail back into public control – which means ownership.’

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